Business Improvement Districts

Business Improvement Districts/Property and Business Districts & Tourism Business Improvement Districts

The use of Business Improvement Districts (“BIDs” – see notes below) and Property and Business Improvement Districts (“PBID’s”) have proven to be a valuable tool for funding specific services and/or stimulating revitalization within a business community. PBIDs are a private sector initiative created to manage and improve the environment of a business district with specific services financed by a self-imposed and self-governed assessment. PBIDs are similar to common area maintenance charges commonly found in shopping malls and office parks. PBIDs can help a business district remain competitive in its regional marketplace. Tourism Business Improvement Districts (TBIDs), mentioned at the end of this article, are currently the hottest item in the formation of business districts in California.

BIDs were first established in California in the 1960’s to provide funding for business-license based business improvement areas. This form of district primarily involved merchants pooling resources to promote their commercial business area, typically in a downtown business area. The Property and Business Improvement District Law of 1994 (PBIDs) modified the form of a business district to include property owners who agree among themselves, through the PBID process outlined under California law, to pay assessments for a specific purpose. The payments are collected at the time property taxes are paid to either a municipality or a county. The local government in turn pays them over to the BID for management and use in accordance with the District’s Management Plan. Assessments within a BID carry the force of law similar to property tax collections, but the funds themselves are only available for use by the BID and are not subject to use by the local jurisdiction that actually collects the assessments.

California’s 1994 PBID legislation expanded the number of years (the term) for which a District could initially be established as well as expanded the type of benefits (improvements) that could be funded through PBID funds. Most BID’s are approved for an initial five years, and then may reapproved for up to additional ten year-term, or multiples thereof.

PBIDs are established within defined geographic areas and are funded primarily through the levy of an annual self-assessment based on the benefits to be received by those paying the assessment. PBIDs fund services such as cleaning streets, providing security, making capital improvements, construction of pedestrian and streetscape enhancements, and marketing the area. The services provided by BIDs are supplemental to those already provided by the municipality. PBIDs may also draw on other public and private funding sources. The operating budgets of BIDs range from a few thousand dollars to tens of millions of dollars depending on the size and purpose of the district. The governance of a PBID is the responsibility of a board of directors composed elected by those paying the assessments. The management of a BID is typically the job of a paid administrator.

There are over a thousand BIDs in the United States, and they exist in almost every one of the top 50 largest cities in the nation. BIDs may also be established in smaller communities and can be created to promote a specific commercial venture such as tourism or other specific business purpose in the commercial business area.

California’s BID law has been used to establish dozens of Tourism Business Improvement Districts (TBID) in California since 1996. A TBID is an organization of businesses (typically hotels/motels/RV Parks and similar hospitality businesses) that work together to bring more customers to their destination. Funds raised through a small assessment on certain sales (typically transit occupancy taxes paid) are used to provide services desired by the businesses in the district which directly benefit them. TBIDs represent one of the fastest growing types of BIDs in the state, reflective of the state’s strong position within the tourism and hospitality industries.

TBIDs can have many functions, all of which are aimed at increasing tourism. The beauty of a TBID is that its operations are determined by the businesses funding the TBID. TBID activities can include a variety of print and internet advertising, visitors’ center operations and many other significant marketing and promotion efforts. Management of the TBID may be handled via a new non-profit corporation formed to manage district funds, or an existing corporation such as a chamber of commerce. Advantages of establishing a TBID may include a mechanism to provide a stable funding source for tourism promotion designed, created and governed by those who pay the assessment. Funds cannot be diverted for other government programs. As in any other BID, TBID funds are generally collected by a local jurisdiction, but done so and remitted to the TBID on a monthly basis rather than twice annually when property taxes are collected.

For more information, particularly about TBIDs, please visit www.venturacountywest.com, the website of Ventura County West, to view the types and scope of the advertising that is possible in a TBID. Vision Economics served as the TBID’s first director.

Notes: BID/PBID legislation

(1) A Business Improvement District (BID) is a property or business based assessment district subject to the provisions of the California Streets and Highways Code, Section 36500 through 35551 and Sections 36600 – 36671.

(2) The Parking and Business Improvement Area Law of 1989 and the Property and Business Improvement District Law of 1994 were created to promote the economic revitalization and physical maintenance of business districts in an effort to create jobs, attract new businesses, and combat revenue losses to urban development and other cities, codified as California Streets and Highways Code.